Kurt Klaus headshot

Brian Medich headshot

By: Kurt R. Klaus, Partner at Dunlap Bennett & Ludwig, & Brian Medich, Associate Attorney at Dunlap Bennett & Ludwig

[01.31.2020 Washington, D.C.]  Real property law (e.g., real estate law) is generally cited as the body of laws from which flow the basic concepts for intellectual property and personal property laws, including that part, known as “chain of title.”  Media content involves both intellectual property and personal property.  Thus, establishing a media project’s chain of title should normally involve setting into place a series of documents (not unlike under real property laws), which, when combined, unquestionably establish who owns or controls that project’s intellectual property and personal property rights. This would apply regardless of the type of media project, i.e., whether in the form of a TV show, film, musical work, musical recording, vlog, branding direct-to-digital video short, or the like.  Having less than an “absolutely clean” chain of title, usually means there are one or more “gaps” and/or “clouds” related to that project’s ownership or control- in whole or in part.  Simply put, a media project having a chain of title “gaps” and “clouds,” could turn out to be REALLY BAD for all involved. Sooner or later, no chain = no gain.

Perhaps the following hypothetical situation and discussion could be illustrative:

Denise had the idea to make a feature-length doc about being nice.  She wrote down her thoughts, including the doc’s factual story arcs and featured subject ideas.  The documentary would center on the lives of Tom Hanks, recently having played Mr. Rogers, and Ellen DeGeneres, known for being among the nicest on TV.   Denise contacted her friend Janice who recently purchased the latest smartphone having a “pro-quality” camera and sound qualities.  The resulting audiovisual files would be compatible with Denise’s video editing software.  After some discussion, Denise and Jan decided to call their film GOOD WILL HUNTING (“GWH”).

Soon after, Denise and Janice got to work- or at least Denise got to work.  Denise took some of Jan’s originally photographed footage of Ellen being nice at a recent event and used it to morph footage of Ellen’s famous sign-off “be kind to one another” into “be NICE to one another.”  It took Denise 15 hours to edit the morph.  She sent it to Jan.  Jan thought the morph was too noticeable.  Denise then excused Jan from the project having snapped back that she wished Jan would have done more for the doc than just show up to shoot footage and that the sound of the morph would have been better if Jan had a better phone.

Surprisingly, Tom Hanks, while at the Sundance Film Festival, somehow heard about GWH.  He contacted Denise who then sent Mr. Hanks a link to GWH’s work-in-progress snippet.  He agreed to team up with Denise, invested $500,000 to finalize the doc, and reached out to Netflix to gain distribution.

Thirty days prior to GWH’s premiere, Netflix’s legal department, Denise, and Mr. Hanks were all contacted by Jan’s legal representative with a giant demand for compensation based upon breach of contract, unauthorized footage usage/copyright infringement, and copyright co-authorship claims.  The attorney assured them that if her client’s monetary and attribution demands were not met, an injunctive proceeding to immediately halt the distribution and any further use of GWH or its elements would be filed, as would a copyright infringement action.  The high-profile nature of this news also caught the eye of Ellen’s agent who, having never previously heard of GWH (the documentary), then contacted Ellen’s legal counsel to investigate and take proper action on behalf of Ellen on grounds of infringed rights of publicity and other claims.  Similarly, the producer of The Ellen DeGeneres Show, Telepictures (claimed unauthorized footage usage) and Matt Damon, Ben Affleck, and Miramax Films (all with GOOD WILL HUNTING (the feature film)) (each brought Lanham Act claims) took notice and inquired.  Not to lose out, Mr. Hanks’ legal counsel contacted Denise reminding her that having received investment funds from Mr. Hanks placed Denise in a fiduciary capacity relative to Mr. Hanks, and asserting that she had breached related state and federal securities laws by not having clean chain of title, thus misleading Mr. Hanks (among other issues).  Netflix legal also pressed on both Denise and Mr. Hanks to resolve all disputes in less than three days or else Netflix sponsors and advertisers would start to get nervous and begin to withdraw financial support- making it necessary to go after Denise and Mr. Hanks for lost compensation.  Striking back, Denise’s lawyer sent Jan a counter-notice demand for providing Denise with uncleared footage of Ellen.  Finally, Denise’s errors and omissions insurance company notified Denise that any claims related to undisclosed failures to clear rights would be exempt from insurance coverage.  Where did it all go wrong?

Well, … let’s see if, in the remaining space for this blog, we can cover at least some of the errors Jan, Denise, Mr. Hanks, and Netflix made- given the above FICTIONAL scenario (certainly not all will be identified or discussed):

  • Denise should have formed a “real” entity (e.g., a limited liability company/LLC) prior to ANY project undertakings. If established, structured, and run correctly, the entity should offer Jan a barrier to personal exposure.
  • The documentary would likely not qualify as news or anything similar. Thus, there are no enhanced possibilities for claiming First Amendment protection relative to commercial uses of Ms. DeGeneres’s image (assuming Mr. Hanks gave his permission).
  • Denise’s entity should have either hired Jan on an independent contractor basis to provide original footage as work for hire/assigned or engaged with Jan pursuant to a collaboration agreement with all copyright and administrative rights to be owned or controlled by Denise’s company. Jan should have been made obligated to handle all clearances involving her original footage and should have provided related warranties and indemnification assurances.  Any such agreements should have indicated that rights of an injunction are waived or otherwise not available.
  • Denise should have conducted a title search to determine whether the title GOODWILL HUNTING was available for use or represented an acceptable business risk if already used.
  • Denise should have disclosed any clearance issues to her project’s errors and omissions insurance carrier and asked for them to be nevertheless accepted for coverage.
  • Netflix should, months ahead of the air date, have reviewed all pertinent paperwork related to errors and omissions insurance applications and coverage and asked Denise to provide proof of ownership and clearance assurances.
  • At the time of Mr. Hank’s investment, any conveyance of amounts should have been made by Mr. Hanks only following the issuance and review of a private placement memorandum for the project and in accordance with the affiliated investment structure.
  • Denise or her attorney should have closely reviewed the Netflix acquisition agreement to determine whether consequential damages were an issue and whether liability limits were in place.

Clearly, you don’t want anyone else claiming ownership of your work or to have grounds to stop the exploitation of your project.  So, close all gaps in chains of title and remove as many clouds on the title as possible.  If any clouds or ownership chain issues remain despite your efforts, then such matters should be disclosed to third parties when appropriate and determinations made whether the benefits of moving forward sufficiently outweigh the risks of moving forward.

 

Posted in: Media & Entertainment